As deficit grows, state set to shrink

Last year’s budget deficit will come to 9.6 percent of gross domestic product, Development Minister Michalis Chrysochoidis stated on Wednesday, as the government prepared a plan to curtail the public sector for presentation to the country’s international creditors next week. Chrysochoidis argued that the deficit would not reach 10 percent thanks largely to the inflow of European Union funds via the National Strategic Reference Framework. However, this means the deficit will miss the revised target of 9 percent for 2011, whose original target had been set at 7 percent of GDP. This is why the representatives of the country’s lenders -- the European Commission, the International Monetary Fund and the European Central Bank, also known as the troika -- will expect to see specific new measures amounting to at least 1 billion euros for 2012. Unless something changes in the schedule, the troika is set to arrive in Athens next Tuesday.

Horst Reichenbach, the head of the EU’s Task Force for Greece, is also expected on the same day. The Finance Ministry is planning to present measures to reduce the size of the public sector via drastic moves such as mergers or closures of state corporations, which will result in job losses. An earlier plan to create a labor reserve scheme failed to achieve the results the government had hoped for and has effectively been abandoned. Finance Ministry data showed on Wednesday that the general government deficit for the first 11 months of 2011 stood at 22.8 billion euros (or 10.5 percent of GDP), down from 23.1 billion euros in the year to October.

The state budget posted a deficit of 24.8 billion euros. What is most disappointing, though, is that by the end of November there were no fewer than 73 state corporations that had not informed the ministry of their finances. On a more positive note, the Hellenic Statistical Authority (ELSTAT) announced on Wednesday that inflation for the whole of 2011 closed at 3.3 percent after a 2.4 percent rate in December, which was mostly due to the dramatic drop in apparel product prices, compared to the year before, in the runup to Christmas.


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